John Malone is the billionaire owner of Liberty Global, an American media beast that operates a large group of cable and broadband networks on a couple of continents. It’s got 20 million customers and revenues of more than $10bn, and now Malone’s interested in buying up Virgin Media. That’s a company valued at about $20bn, so not a small purchase.
The bid may be revealed in the next couple of days, and if Malone pulls it off, it will make him a direct competitor to Rupert Murdoch, as his News Corp controls BSkyB, and it’ll be Liberty Global’s first proper foray into the UK. Murdoch and Malone have had an on-off business relationship as both partners and rivals for decades. For instance, in the 2000s, Malone built up an 18% stake in News Corp – the second-largest shareholding after Murdoch himself – but then swapped it for News Corp’s entire shareholder in DirecTV, an American satellite television business.
Investors must be pretty excited about the bid (if it materialises), as the price of shares in Virgin Media soared almost 15% in early trading on Tuesday morning, pushing the firm’s market cap up to £7.6bn.
It is worth noting that the $20bn price tag is an ‘enterprise valuation’, which excludes net debt (Virgin Media had £5.7bn at the end of Q4 last year). Nonetheless, the deal is still in the discussion phase, and although Virgin Media confirmed that talks are going on as we speak, obviously there is always room for the deal to come off the rails.
As far a strategy goes, though, the move would be a good one for Liberty Global. It already has network services in Germany, Switzerland, the Netherlands and Chile, and buying a cable company such as Virgin Media in full would allow it to centralise it’s set-top box purchasing, for example.
It will be comforting for Malone to know that Virgin Group, with just 3% of the equity in the media business, will not have any say over whether the deal goes ahead. Not such ‘powerful stuff’…